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TMI Blog2020 (11) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by National Company Law Tribunal, Mumbai Bench (hereinafter referred as 'Adjudicating Authority') in Company Petition No. C.P. No. 2431/I&BP/2019. The Adjudicating Authority through impugned order, initiated the CIRP of the Corporate Debtor by admitting the Operational Debt. Hence the present Appeal is being preferred by the Appellant. 2. The brief facts of the case are that the Corporate Debtor had engaged the Respondent No. 1/Operational Creditor for its custom clearance services. The Corporate Debtor availed the services of the Operational Creditor from 2015 till 2019. The Operational Creditor filed a petition before the Adjudicating Authority dated 24th June, 2019, seeking to set in motion the Corporate Insolvency Resolution Process (CIRP) alleging that the Corporate Debtor committed a default in making payment of Rs. 18,09,541/- including interest at the rate of 24% p.a., by invoking the provisions of section 8 and 9 of I&B Code. 3. The learned counsel for the Appellant stated that the Corporate Debtor had regularly paid the Operational Creditor all the amounts that were due to be paid to the Operational Creditor for its services during the aforesaid period. Pertinently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On 6th March, 2019 the Corporate Debtor addressed a Legal Notice to the Operational Creditor thereby seeking the ledger books and bank statements with respect to the monetary transactions between the parties. 7. It is submitted by the learned counsel for the Appellant that during the course of the business, the Corporate Debtor had issued certain blank un-dated cheques to the Operational Creditor as security, a practice that is prevalent in business to secure debts. The Operational Creditor, acting with mala fide intention presented the cheques after filling in amounts not legally recoverable by it. The said cheques were dishonoured for 'insufficient funds' in the Corporate Debtor's bank account on 22nd February, 2019. The Corporate Debtor was not expecting the cheques to be deposited and therefore the arrangement to keep sufficient balance in the account was not made by it. Since, the alleged principal amount of Rs. 14,59,308/- had already been paid to the Operational Creditor, the deposit of cheques amounting to Rs. 4,01,049/- by the Operational Creditor was mala fide and erroneous. 8. It is further submitted on behalf of the Appellant that the Operational Creditor did not se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid amount was paid by the Corporate Debtor to the Operational Creditor's employees towards the out of pocket expenses. The admission of the Operationmal Creditor with regard to payment of unpaid Operational debt is recorded in the impugned order as follows: "7. The Corporate Debtor contended that they have made payment to the extent of Rs. 14,17,000/- to four persons who are employees of the Petitioner, and the Petitioner failed to account for the same whereas the Petitioner refutes the same, saying that those payments were towards the out of pocket expenses incurred during the process of customs clearing of Corporate Debtor's goods." 12. It is contended on behalf of the Appellant that the Operational Creditor had not adduced in support of its contention that the payment of Rs, 14,17,000/- was made towards the out of pocket expenses. In fact, the out of pocket expenses actually incurred by the Operational Creditor are mentioned in the invoices under the heading of 'Non-receipt Charges' and hence there could not have been any other amount towards out of pocket expenses that is payable by the Appellant to the Operational Creditor apart from what is mentioned in the invoices. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arred by limitation since the Operational Creditor has admitted that the dates of default of the said amount are prior to three years preceding the date of institution of Company Petition i.e. on 24th June, 2019. 16. It is also contended that the Adjudicating Authority has failed to consider that the out of pocket expenses actually incurred by the Operational Creditor is mentioned in the invoice itself under the heading non-receipt charges, hence there could not be any other amount towards out of pocket expenses that is payable by the Corporate Debtor. The Adjudicating Authority failed to appreciate that the onus of proving that the amount of Rs. 14,17,000/- paid by the Corporate Debtor to the employees of the Operational Creditor was towards out of pocket expenses was totally on the Operational Creditor. 17. Per contra, learned counsel for Operational Creditor submitted at the outset that the answering respondent had been providing custom clearing services to the Corporate Debtor since 2015. The Operational Creditor issued bills as well as tax invoices with respect to the services provided to the Corporate Debtor. The Operational Creditor has been maintaining the running ledger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that in their reply that the invoice dated 22nd August, 2015 as well as 19th September, 2016 were not raised on the Corporate Debtor but on a third party under the name of one New Decent Footwear Industries which were not payable by the Corporate Debtor. It was contended by the learned counsel that all such pleas taken by the Corporate Debtor were false, devoid of any merit and an afterthought. 21. It was contended by the Learned Counsel that the answering respondent in their Rejoinder to the reply of the Corporate Debtor submitted that the invoices raised by the Operational Creditor inter alia had the following terms at the foot of the invoices: viz: "all cheques/demand draft in payment of the bill should be drawn in favour of "M/S Wishwa Naveen Traders" on Mumbai Branch only." Therefore, it is submitted that there was no question of the Corporate Debtor making payments to the employees of Operational Creditor and claiming credits for the same. In addition, in the alleged email dated 05th March, 2019, it has not been mentioned anywhere by the Corporate Debtor that the said amount of Rs. 14,17,000/- has been paid to the employees of Operational Creditor. 22. It was further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the liability in respect of the outstanding payable by them to Operational Creditor. The contents of the confirmation of accounts have not been disputed by the Corporate Debtor. In any event, the Corporate Debtor had not disputed the invoices, thus, based on the invoices itself, it is evident that the Corporate Debtor is in default to make payment to the Operational Creditor. It was thus denied that the Operational Creditor has not provided the ledger to reconcile the accounts as the ledger confirmation provided by the Operational Creditor has the acknowledgement and signatures of the Corporate Debtor. 27. Having heard to the parties and after perusal of the records the Adjudicating Authority has given the findings that there is a debt and default on the part of the Corporate Debtor. The Adjudicating Authority have put its reliance on the Judgment of the Hon'ble Supreme Court in the case of "Mobilox Innovation Ltd. v/s. Kirusa Software (P) Limited-2017 (SCC Online SC 1154)" held as below: - "40 Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Our Clients have informed us that the relationship between you and our client is of more than 7 years and during all the years our client have been availing services from you and payment was made to you at all the times on regular intervals including payment being made in the personal accounts of your key employees i.e. Mr. Shailendra Yadav (Rs. 8,81,000/-), Mr. Manoj Prajapati (Rs. 1,69,000/-), Mr Raghav (Rs. 3,27,000/-) and yourself (Rs. 40,000/-) aggregating to Rs. 14,17,000/- (Rupees Fourteen Lakhs Seventeen Thousand Only). Please note the laws of India. Our Client have informed us to state that the reason payments of Rs. 14,17,000/- (Rupees Fourteen Lakhs Seventeen Thousand Only) was made to your key employees i.e. Mr. Shailendra Yadav, Mr. Manoj Prajapati and yourself was on your request and there is no other need to make the payment to your key employees i.e. Mr. Shailendra Yadav, Mr. Manoj Prajapati and yourself and hence, we hope that you might have treated that payment as payment against your invoices and business entity and accordingly have been treated in your Ledger as per Accounting principles applicable all over. Under the circumstances, we as instructed by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onoured with remark 'Payment Stopped by The Drawer'. This considered course of action taken by the Corporate Debtor is indicative of existence of disputes over payments between the parties. All these email Communications and the legal notices sent by the parties to each other had occurred prior to the issuance of demand notice under section 8 by the Operational Creditor. These sequence of events showed that there was a dispute in existence prior to the issuance of demand notice by the Operational Creditor. 33. The Adjudicating Authority have put its reliance of the aforementioned Judgment of Hon'ble Supreme Court and concluded that the disputes raised by the Corporate Debtor are not the real dispute and also does not falls within the ambit of Section 5(6) of I&B Code. However, the Adjudicating Authority have not reasonably explained the rationality for not considering this as a real dispute. Also, Section 5(6) of the I&B Code is an inclusive provision and does not confine the Adjudicating Authority from considering the existence of a dispute from a broader angle. 34. The intent of Legislature is very vital for interpreting any law, which can be well deduced from the words of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since there was a dispute existing prior to the issuance of Section 8 notice, the insolvency provisions cannot be invoked. However, whether the amount of Rs. 14,17,000/- was received by the Operational Creditor or not and whether the cheques which were returned dishonoured were issued by the Corporate Debtor as a security or not and whether the authority was given to the Corporate Debtor to make the payments to the personal accounts of the employees of the Operational Debtor are disputed questions of law and facts and shall be decided by the appropriate forum as the Adjudicating Authority cannot substitute the recovery forum.
39. For the reasons aforesaid, we disagree with the observation made by the Adjudicating Authority and set aside the impugned order dated 13th February, 2020 passed in C.P. No. 2431/(I&BP)/2019 and the Appeal is allowed. Hence the Corporate Insolvency initiated against the Corporate Debtor is set aside.
40. We also direct the Adjudicating Authority to pass the necessary order for compensating the Insolvency Resolution Professional for his remuneration or expenses incurred by him while he was working in such capacity. No Order as to cost. X X X X Extracts X X X X X X X X Extracts X X X X
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